|
An Approach For Supply Chain Management Improvement
By Thomas Craig
Expert Author
Article Date: 2007-03-16
"Without systematic and abandonment, an organization will be overtaken by events." Peter Drucker
"All organizations need a discipline that makes them face up to reality." Peter Drucker
"The definition of insanity is doing the same thing over and over and expecting different results." Attributed to Benjamin Franklin.
These quotes are very relevant to the business world and especially to supply chain management (SCM). This is true for manufacturers, retailers, wholesalers, distributors and even 3PLs.
The need for purposeful abandonment may be viable with the repetitive nature of the problems that occur. Often chains operate in a zone of tolerated discomfort. Fire-fighting, expediting, crisis management, band-aids and written procedures show weaknesses in processes and programs. Many resources are expended on supply chain management.
Much of the effort reflects the reality that companies are structured and function as they did 90 years ago. This is in spite of changes such as:- Global trade, competition, sales and sourcing with its complexities and scope as compared to domestic trade
- Vertical, functionally-defined organizations trying to deal with the time-sensitive, horizontal-driven supply chain process
- Need for lean management to reduce waste
- Accounting rules that run counter to SCM and to Lean successes
- Increasing sourcing distance and time without full realization and acceptance of the impact on operations, inventory, sales and costs
Companies are designed, built and staffed at a time and for reasons that are not valid as the business evolved. The original organization configuration often does not work effectively and efficiently for the resources expended. Technology may be used as a tool to try to make these legacy structures endure.
Businesses should change; it is necessary for growth, profitability and sustainability. The risk of not changing is to be overtaken by events rather than taking advantage of events. A company should be capable of change. However, significant change is not easy for a company to absorb and do. Change management can be the challenge.
Purposeful abandonment is meant to leave the past behind, to put resources where they are needed and to organize and do it in a way to best exploit the future and the opportunities that it brings. It also recognizes the reality that constantly trying to fix a broken process is a waste of people, time and cost.
The serious potential for purposeful abandonment and starting over or restructuring arises with significant changes in the company. These can involve a merger or acquisition, shifting into new markets with new demands or changing strategy to be different in how you serve a market or customers, rather than a strategy of meeting the competition. Such change presents opportunity for someone to lead and drive the effort to abandon the present supply chain management approach and to design, develop, implement and manage the new and improved SCM. Out with the old structure and practices, and in with the new.
Depending on how visionary the company management is and how great the opportunity for abandoning the legacy SCM, there is still some reality. Not all the issues mentioned above, that have existed for 90 years, can be undone. But that should not stop the firm from abandoning what does not work well for the resources expended and the results obtained.
The new supply chain approach should be a strategy. While the exact details can vary depending on the company and where, why and how it is trying to position itself, it should:- Recognize where you are now and where you want to go. This is the first step. It is not a wish list of things you want. The plan is the how you are going to design the new supply chain management. The strategy should be dynamic and be a living plan that evolves as you progress.
- Define the process, people and technology needed to take you from where you are now to where you want to be. There should be milestones with the plan with timing to keep you on track-or to tell you if you are not on track.
- Be creative. Remember, the point is to let go of the past and use resources effectively. Reinventing the past is not abandoning it. Do more than "put lipstick on the pig".
- Include the scope, breadth and complexity of supply chains. To deal with this, recognize the participants, both external and internal, and define them and their importance and risks. Use a variation of the Kraljic matrix to segregate relationships.
Assess the new approach for any gaps and redundancies. These are the bane of any successful process. They will creep in for many reasons. Do not bring them into the new SCM from the beginning. Otherwise you will begin with areas that will require extra and unnecessary resources-the very thing that you want to undo with purposeful abandonment.
Accept the caveat that this is not an outsourcing matter per se. If a firm does not have a sound SCM program, what will actually be outsourced and how will it be outsourced so that it works properly. Outsourcing may be an option for executing the new strategy; it cannot fix a flawed internal supply chain process and program.
Purposeful abandonment is an approach that does not receive enough recognition and use for effective management in all industries and sectors of business. Significant changes in a company's strategy, market or direction can create the opportunity to use it.
About the Author:
LTD provides logistics consulting for strategic and tactical needs. The scope of capabilities is broad--supply chain management, outsourcing, transportation, warehousing, inventory management, and more for both domestic and international needs. Clients include retailers, wholesalers/distributors, manufacturers, logistics service providers and 3PLs.
|
|
